The Economic Substance Of Foreign Tax Credits
November 19, 2015 | New York Law Journal
U.S. taxpayers pay taxes on all of their income, regardless of where it is earned. Congress has recognized that this basic principle of the Internal Revenue Code may result in “double taxation” of income earned outside the United States, and the Code provides a dollar-for-dollar credit reducing a taxpayer’s U.S. liabilities by the amount of foreign taxes paid. In recent years, the government has challenged attempts by corporate taxpayers to utilize foreign tax credits generated through complex transactions. This article discusses recent decisions by several Circuit Courts of Appeals addressing arguments that credits should be disallowed under the common law economic substance doctrine.
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